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Commuters using the Northern Line this morning are facing severe delays due to a faulty train.

There is no service between Camden Town and Edgware and severe delays between Camden Town and Kennington, with minor delays on the rest of the line.

]]>Wed, 30 Nov 2016 08:16:00 +0000Caitlin Morrisonhttp://www.cityam.com/254675/commuter-chaos-during-morning-rush-hour-northern-linehttp://www.cityam.com/254669/5-fuss-now-even-vegans-gunning-carney
Mark Carney has had a pretty tumultuous year. His critics have lined up to attack him for politicising his office during the referendum campaign while his supporters credit him with being the only the grownup left standing in the wake of it.

He has survived bruising encounters with eurosceptic MPs on the Treasury Select Committee. Jacob Rees-Mogg, for example, has often managed the dual task of appearing unfailingly polite while at the same time witheringly hostile. He's also found himself dragged into Westminster politics as an unwitting pawn in power games between No 10 and the Treasury and has endured month after month of media speculation on everything form his tenure at the Bank to his future political ambitions.

In short, he's faced his fair share of tough times and – to his credit – he's still standing. All that could be about to change, however, as Threadneedle St could be about to face its toughest opponent yet: the vegan lobby. Yes, it turns out that the much lauded new five pound notes contain trace amounts tallow (animal fat) “in the polymer pellets used in the base substrate of the notes.” This technical description comes courtesy of the Bank of England twitter feed, which responded to a question from a (vegan) user about whether tallow was present in the new notes.

Upon confirmation that trace amounts of animal products were indeed lurking within our new fivers, an online petition has been launched which currently has 70,000 signatories – all united in fury and demanding that the offending ingredient be dropped from the manufacturing process. One devastated tweeter howled “So the BoE support the wholesale slaughter of animals...why doesn't this surprise me?” Just wait until they find out that crayons, condoms and plastic bags contain pretty much the same material as the hardy new note.

Will the Bank buckle under online pressure? It's unlikely. Officials declined to comment on the petition but did point out that they buy polymer pellets from an external company which supplies banknote material for 80 denominations in 24 countries. Carney should hold firm in the face of outrage. After all, he's seen off bigger threats this year than an e-petition.

The British people have no cake and they certainly aren’t eating it. The scribbled notes spied in Downing Street – the public’s only way of learning what ministers’ plan is on the most important question facing the country in a generation – show that five months on from the referendum, this Brexit government is in chaos. There is no danger of damaging the government’s bargaining position, because it doesn’t have one.

While a poll showed 90 per cent of the public want to remain in the Single Market to avoid a £220bn black hole in our public finances, Prime Minister Theresa May pushes for a hard Brexit that Britain didn’t vote for. In Richmond Park alone, 5,000 financial services jobs would be endangered if Britain lost passporting rights to the world’s most lucrative market.

Tomorrow, Richmond Park residents can vote against hard Brexit by rejecting Zac Goldsmith and voting Liberal Democrat. Britain’s future is in their hands. An earlier by-election killed the poll tax. This by-election could kill hard Brexit.

Alex Deane, managing director at FTI Consulting, says No.

The May government’s determination not to “give a running commentary” on Brexit stands in stark and welcome contrast to recent media-focused administrations of both political colours.

It seems that Westminster can’t win. Care about the press and you’re spin obsessed. Focus on policy and you’re starving the public of information and failing to be transparent. We must trust the government to get on with the important task in hand, knowing as we do that revealing too much will undermine negotiations carried out on our behalf.

Sure, giving business a better sense of the broad direction might be welcome. But May’s team’s preference for action rather than words is the right one, and when it comes to international, multilateral treaty change, it’s the negotiation that counts, not bombast and pontificating in the media. Many in the media dislike their diminished role in the political process – which may explain rather a lot of the hostility to the government’s approach.

Close Brothers Asset Management (CBAM) has strengthened its financial education corporate relationship team, making key appointments in senior positions. Mike Hardy (pictured) has been appointed as director of strategic partnerships having over 15 years’ experience in this area with senior positions at three FTSE companies; HSBC, Aviva and Lloyds Bank. His role will be to widen the use of CBAM's financial education services across UK employers via key partnerships and associations. Mike is joined by three colleagues bolstering our employer relationship team: Tracie Denson and Marcus Read join as directors – financial education; Tracie will look after businesses in the north of England and Scotland and Marcus will work in the south east. Stacey Lewis also joins the client service team.

GapCap

GapCap, an alternative finance provider for SMEs, has appointed Rob Boomer as financial controller. In his new role, Rob will be responsible for providing financial control of the business, working both internally and externally to ensure GapCap’s finances are vigorously monitored, controlled and optimised, as the business continues to grow. Previously finance business partner at Heathrow Airport, Rob joins GapCap with significant experience in financial administration and client engagement across several sectors including financial services, commercial and retail. Boomer has been integral in handling all financial aspects of Heathrow Airport’s £3bn development plan, managing a team of six analysts across the airfield and liaising with key stakeholders. Prior to this he worked at blue-chip firms including Deloitte, Price Waterhouse Cooper, Ernst and Young and Kingfisher.

ContactEngine

London tech company ContactEngine has appointed Bob Mann as chairman of the board. This follows the recently announced Series A investment of £2m made by venture capital firms Amadeus Capital Partners and Beringea. Mann replaces former chair Philip Kimberley, who will remain as a non-executive board director. As an entrepreneur and business leader, Mann has more than 25 years in the high tech industry. His success in working with businesses across customer applications, cloud-based SaaS and US market expansion will help to steer ContactEngine’s growth internationally after the company’s recent fundraising.

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]]>Wed, 30 Nov 2016 05:45:00 +0000City A.M.http://www.cityam.com/254646/city-moves-30-november-2016-whos-switching-jobshttp://www.cityam.com/254652/whos-afraid-big-bad-pensions-deficit-contrarian-stock
For some UK companies, having a large pension deficit is like a proverbial albatross around the neck – unsightly and foreboding.

This can make the shares appear cheap on some measures. But valuing stocks with large schemes is difficult, due to the enhanced complexity of pension accounting. Actuaries and trustees make numerous assumptions regarding future liabilities of schemes, and also the returns that the plans might generate.

In recent years, liabilities have been increasing as scheme members live longer, but returns have been falling with long-term interest rates. Different companies’ schemes make different assumptions – one scheme assuming long-term returns of 4 per cent, for example, is riskier than another of equal size assuming 2 per cent.

The relationship between the company and the plan trustees also needs to be considered. Some trustees may be agitating for an increase in contributions at an upcoming review, whereas others may be more relaxed about the existing level of contributions.

These factors, and others, combine to make pension accounting valuation very complex, prone to large revaluations, and ultimately something that most stock-pickers would simply prefer not to do.

However, if you spend the considerable time required to do the painstakingly detailed work, a contrarian investor might occasionally come to the conclusion that the market consensus is too negative on the stock, and the risk/reward is attractive, even with a large deficit. Of course, it is also possible that you could come to the conclusion that the market is right to steer clear of the stock and the albatross hanging from its neck.

Indeed, BAE Systems is a stock we took the decision to sell out of because we felt the market under-appreciated the risks in the scheme. Elsewhere, however, we have seen sources of contrarian opportunity. In the cases below, we believe the market’s preoccupation with companies’ pension schemes obscures strengths in the underlying operating businesses.

BT

Often referred to as a pension scheme with a telecoms company attached, we estimate that BT’s deficit is equal to around 25 per cent of the company’s market capitalisation. While this is undeniably very high, we believe it is manageable, because BT recently completed an actuarial review, during which the regulator and trustees showed a welcome degree of pragmatism.

Even after high levels of existing cash contributions to the scheme, BT trades at a 9 per cent free cash flow yield. This is a significant anomaly for a company in defensive end markets and with good growth potential.

Coats

Imagine you are a broker covering small-cap industrials. You have a relatively large range of companies you could write about and pitch to your clients. You need to shorten the list and focus on those stories you think can generate interest and excitement. Some of your stocks have small pension deficits, but one, Coats, stands out among the pack, with a deficit of 125 per cent of market cap, due to a complicated history.

First, you know that most fund managers you speak to are wary of pension deficits and, second, as a small cap industrials analyst, pension accounting is not necessarily your speciality. It’s quite an easy decision to focus on something else. Maybe you’ll get round to it next week!

So spare a thought for our small cap analyst who has taken the time to go through the unusual situation at Coats, and come to the conclusion that the market is too pessimistic about the prospects of how the deficit will impact Coats’s (otherwise very healthy) cash flows. Should this situation improve, the underlying qualities of the operating business will become more “investable” and the stock should re-rate from its current price-earnings multiple of 8x.

Royal Mail

Unlike BT, Royal Mail was able to shift its enormous defined benefit pension scheme into public ownership as part of its transition to private ownership. However, the firm has an ongoing obligation to make contributions to the scheme, and many investors seem to worry that these significant and rather generous (in comparison to peers) payments could impact the company’s ability to grow its dividend.

We think this too pessimistic. In some cases, Royal Mail’s pension contributions are up to 40 per cent higher than other FTSE 100 companies. We think there is a good chance that the company will be able to negotiate a more favourable outcome, and that this will result in investors being able to re-focus on the considerable attractions of the underlying business.

]]>Wed, 30 Nov 2016 05:30:00 +0000Alex Wrighthttp://www.cityam.com/254652/whos-afraid-big-bad-pensions-deficit-contrarian-stockhttp://www.cityam.com/254639/london-accounted-nearly-quarter-700000-new-jobs-2014-15
UK firms created over 700,000 jobs in 2014-15 - with almost a quarter of them located in London.

Research from the Enterprise Research Centre has found that of the 709,174 net new jobs created in the period, 23 per cent of them came from London firms.

Total private sector employment rose to 21.6m as a result - the highest number ever for the sector.

London and the South East also became home to the highest number of new start ups, but a higher proportion of start ups based in Cumbria and North East Scotland made it past their third year.

Despite London's considerable contribution, Professor Mark Hart, deputy director of the ERC, said the results show job creation is spread across the UK. High proportions of the fastest growing businesses were found in Scotland, Wales, and Northern Ireland.

"Nor is it restricted to certain types of 'fashionable' high-growth firms - there's a complex growth pipeline of companies in every corner of the country that have different support needs based on their individual ambitions," Hart said.

Business minister Margot James said: "This research shows vibrant business growth across the nation and the highest ever level of private sector employment.

"The government will shortly publish the industrial strategy green paper to boost productivity, create more jobs and drive economic growth. The new £23bn national productivity investment fund will help to ensure our economy is fit for the future, and an extra £400m for the business bank will unlock investment for innovative firms across the country."

The national productivity investment fund was announced in chancellor Philip Hammond's Autumn Statement. The £23bn will be spent over five years seeking to improve UK productivity - which is lagging behind the US and Germany - and will be funded by additional borrowing.

America is big, and it does not think as one. Some men hate women and voted for Trump to preserve the patriarchy – but most fell for his promise of quick economic fixes. Some women did not vote for Clinton out of jealousy for a more successful sister, whereas others were not convinced by her policies. Among the many well-documented factors that influenced the outcome of the US election, misogyny was one, but bringing the election down to misogyny alone is simplistic and incorrect.

Even more incorrect is shaming the American women for not “displaying gender solidarity” in their vote.

None of the women I know voted for Trump. If they had, I would have probably shamed them as well. For helping elect an autocrat to the position of the most powerful man in the world. For falling for his blatant demagoguery without bothering to analyse the credibility of the statements and promises made. For overlooking the fact that Trump is, fundamentally, a charlatan.

But I would never, never have reproached them for not voting for Clinton on the basis of gender, because political elections are an exercise in choosing the strongest candidate for the job – not promoting a feminist agenda.

Clinton was of course the strongest candidate for the job, and seeing Trump’s face leer from my computer screen on the morning of 9 November, I thought that I had entered into the realm of the strange and the ridiculous. But reading Clinton’s concession tweets that same day, I did not like the way she tried to link her defeat to misogyny. Her pinned tweet, “favourited” by 1m viewers, said: “To all the little girls watching... never doubt that you are valuable and powerful & deserving of every chance & opportunity in the world.”

This is a mischievous message to give to the little girls as it implies that Clinton had lost because America does not value women. As such, it smacks of victimhood, rather than being empowering. Second, Clinton seems to suggest that only a female President can be a true champion of women’s rights. This is wrong: just look at Obama’s formidable track record in this respect. Also, when the little girls grow up and start voting in political elections themselves, they should know to vote for a candidate with the right vision, policies and track record, rather than on the basis of their gender – and this is what we should be teaching them now.

Finally, if we are really honest, what will affect the little girls in the next four years is not the fact that the 45th President of the United States is a man. What will affect the little girls is that this President had advocated torture and violence and threatened to jail his opponent. That this President had insulted an entire religion, degraded women and mocked the disabled. That this President tweets with spelling mistakes, talks about his cabinet in the language of reality TV, and has absolutely no experience of holding public office.

What will affect the little girls in America is that, despite Trump’s obvious flaws and despite Clinton’s obvious superiority as a political candidate, the majority of their countrymen had voted for Trump. This is the kind of nation that the little girls will be living in. And this is a far bigger problem, in my view, than not having someone to address as “Madame President” for the next four years.

]]>Wed, 30 Nov 2016 04:53:00 +0000Elena Shalnevahttp://www.cityam.com/254665/we-should-not-telling-little-girls-americans-hate-womenhttp://www.cityam.com/254667/uk-universities-need-bespoke-brexit-deal-flexibility
The fate of British universities – their research, their European staff and their students – has become a major issue following the EU referendum. Under the home secretary’s proposals, they would be classed as employers with a large number of non-UK staff – 17 per cent of teaching and research posts are occupied by EU nationals. They would be hit by hiring restrictions and the introduction of a work permit scheme. And students would be affected by any student visa scheme.

The research income which UK universities receive would also take a knock. My university, Cambridge, receives 17 per cent of its research income from the EU, for example, and more from the European Research Council (ERC) than any other in Europe, while also benefitting from the EU’s Horizon 2020 funding programme. No wonder that the Education Select Committee has called for evidence on Brexit’s impact on higher education.

Of course, it is not a one way street either. British academics gain from working in institutions in other EU countries, and students benefit from studying abroad. The Erasmus programme has seen over 200,000 British students study for up to a year in a European university.

It isn’t surprising that those in the university sector, and beneficiaries of a university education, tended to vote stay in the EU, as research by Goodwin has shown. But these individuals also formed part of the elite many Leave voters saw as the cause of their problems, not the solution. A special deal for universities is not going to find favour with them.

What kind of relationship with the EU would be best for universities? In the short term, providing a right of residence for all EU nationals working in the UK would offer some reassurance. Post withdrawal, taking the Norway option by joining European Free Trade Association (EFTA) and then the European Economic Area (EEA), would deliver the closest thing to the status quo – membership of the Single Market, but not the customs union, access to research funding, and the Erasmus programme. This would allow EU students to continue to study in the UK and British students in the EU, while EU academics and researchers would continue to work in the UK on the same terms as at present.

However, this arrangement, while the most attractive for universities, has already been rejected by the Prime Minster, as has the more tailored Swiss option. Norway and Switzerland have to accept free movement, pay into the EU budget, and accept EU rules without formal involvement in their adoption – all of which, we are told, would be unacceptable to the British people.

A Canada-style free trade agreement would not offer the free movement of academics, researchers and students that universities would like. Rejoining the WTO as an independent state will not deliver this either.

The best that universities can hope for is a bespoke deal. This might include free movement of academic researchers and greater flexibility for migration of students coming from the EU, at least for those going to well-established institutions. Universities hope that the Tier 2 and 4 visa regimes do not apply because the bureaucracy is already onerous for non-EU students and academics. Voluntary contributions to the Erasmus budget and future research programmes like Horizon 2020 might give academics working in the UK the chance to participate in these arrangements.

The negative effects are being felt – even before Article 50 has been triggered. While students commencing courses in 2016 and those applying for 2017 are guaranteed home fees status and access to loans and grants for the duration of their course, the position of those considering entry in 2018 is far less clear.

The risk that they might be reclassified as overseas students will deter applications from Eastern Europeans, for whom a doubling of fees may take up the family’s annual income. Reports of a 41 per cent rise in race and religious hate crimes since the vote hasn’t improved the UK’s image.

German and Irish universities are working hard to attract the best students who have traditionally come to the UK. There is also a risk that if access to the highly attractive ERC grants is denied, academics will move to where the money (and prestige) is. They will go before they are pushed. The EU will lose out as well because it needs the UK to help sustain excellence in the EU research system.

As for law, my own discipline, the prospects are not good. The demise of EU law will be a lost opportunity to the students to learn about a very different, evolving legal system, though competition will function very much as is, given the extra-territorial effect of EU competition law.

Other effects will be more intangible. If the City declines in importance, there will be fewer job opportunities for our graduates. And if English law ceases to become the choice of law for major contracts, and London is no longer the chosen place of jurisdiction, the brilliant Australians and New Zealand students who come in large numbers for graduate work may decide to go elsewhere.

]]>Wed, 30 Nov 2016 04:47:00 +0000Catherine Barnardhttp://www.cityam.com/254667/uk-universities-need-bespoke-brexit-deal-flexibilityhttp://www.cityam.com/254662/four-year-folly-office-budget-responsibility-shouldnt
Economic forecasts have become a political hot potato. The Office for Budget Responsibility’s (OBR) predictions, presented as part of the chancellor’s Autumn Statement, have put the government under pressure. The OBR has revised down its forecast for GDP growth over the next four years by 1.4 percentage points.

The real controversy is that their gloomy projections for GDP and government finances have been put down to Brexit. In the simple phrase of the OBR: “Any likely Brexit outcome would lead to lower potential output”. Lower output leads to lower tax receipts, and worse government finances.

To be fair, the OBR does say that “in current circumstances the uncertainty around the forecasts is even greater than it would be in normal times”. But just how great is this uncertainty?

Studies are published from time to time about the accuracy of economic forecasts. The best set of records is kept in America, though less systematic evidence for the UK shows that the track records are very similar in the two countries.

The Survey of Professional Forecasters (SPF) collects the forecasts on variables such as GDP growth and inflation from a wide range of forecasters. Its database goes back almost 50 years to 1968. Just one quarter ahead, the predictions are on average completely accurate. “One quarter ahead” means the next three months, so it would currently refer to the period January to March 2017.

This average accuracy conceals errors in most forecasts for any particular quarter, the errors cancel out over time. For example, the quarter from July to September 2008 marked the onset of the major recession of the financial crisis. At an annual rate, GDP fell by 1.9 per cent compared to the previous quarter. But the SPF predictions made in the April to June period for July to September were for growth of 0.7 per cent.

The SPF predictions account for only 25 per cent of the variability around the average. When we go four quarters ahead – just one year – the predictions are even worse. Negative growth, for example, has never been predicted, even though there have been 26 quarters of negative growth since 1968.

The track record, which has not got any better over time, shows that in relatively calm times, forecasts just one year ahead have a reasonable degree of accuracy. But when major changes are taking place, just when they are really needed, they have none.

The OBR cannot be blamed for producing predictions four years ahead when the track record of the forecasting community shows them to be of no value. That is what George Osborne mandated it to do when he set the independent body up in 2010. But four years ahead, almost any set of predictions is just as good – or bad – as another.

It would be much better to abolish the OBR and restore responsibility to the Treasury and, ultimately, to the politicians. If they get it wrong and are too optimistic, we can at least kick them out.

]]>Wed, 30 Nov 2016 04:45:00 +0000Paul Ormerodhttp://www.cityam.com/254662/four-year-folly-office-budget-responsibility-shouldnthttp://www.cityam.com/254622/confidence-uk-business-prospects-reaches-10-month-high-but
Confidence in business prospects has risen to a 10-month high for UK businesses, despite a big rise in concerns over the country’s economic health, according to a new survey.

Over half of companies said that they expected business prospects to improve in the next year, and only five per cent said they expected their business to suffer, says the survey by Lloyds bank.

However, confidence in economic prospects decreased 20 points to a net positive of 14 per cent, reflecting uncertainty as the UK prepares to invoke Article 50 and start the process of leaving the European Union in March 2017.

Business confidence decreased markedly after the vote to leave the European Union, dropping to levels not seen since 2012. Since then levels have returned to pre-referendum levels, according to the survey of 200 companies.

The survey also highlights significant sectoral divergence, with confidence in consumer services rising by 11 percentage points, while the business services declined by 17 points.

Confidence in manufacturing and construction firms stayed almost flat, up one point at 32 per cent.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Our November survey shows a small decline in overall confidence but the results as a whole are consistent with solid economic growth continuing in the fourth quarter.”

“In addition, confidence levels in services have caught up with the industrial sector in recent months,” he added.